TaxTMI 
TaxTMI 
Opening of Current Accounts by Banks - Need for Discipline
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....ts, without any restrictions placed in terms of the above-mentioned circular dated August 6, 2020. An indicative list of such accounts is as given below: (i) Accounts for real estate projects mandated under Section 4 (2) l (D) of the Real Estate (Regulation and Development) Act, 2016 for the purpose of maintaining 70% of advance payments collected from the home buyers. (ii) Nodal or escrow accounts of payment aggregators/prepaid payment instrument issuers for specific activities as permitted by Department of Payments and Settlement Systems (DPSS), Reserve Bank of India under Payment and Settlement Systems Act, 2007. (iii) Accounts for settlement of dues related to debit card/ATM card/credit card issuers/acquirers.....
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....other instructions contained in the circulars ibid remain unchanged. Yours faithfully, (Prakash Baliarsingh) Chief General Manager Annex Frequently Asked Questions 1. Whether banks are required to obtain No Objection Certificate (NOC) before opening current accounts as per the revised guidelines? The previous guidelines which required banks to obtain NOC before opening current accounts have been replaced by the revised guidelines issued vide circular dated August 6, 2020. The requirement of obtaining NOC is no more applicable. 2. How shall banks identify the aggregate exposure of the banking system to a customer/borrower for the purpose of opening current accounts and/or CC/OD accounts under ....
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....ted to open current accounts for borrowers who have availed any fund or non-fund-based credit in the form of overdraft facilities. 7. In respect of proprietorship firms, whether credit facilities availed by the proprietor in his/her personal capacity like home loan, loan against property, etc shall be included in the aggregate exposure of the banking system for the purpose of this circular. In case of proprietary firms, the aggregate exposure shall include all the credit facilities availed by him/her, for business purpose or otherwise. 8. As per paragraph 1 (ii) of the circular, where a bank's exposure to a borrower is less than 10 per cent of the exposure of the banking system to that borrower, while credits are freely permitted, ....
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....s well as fee/charges for opening of LC/ BG, issue of DDs, etc. before transferring the funds to the CC/OD account of the borrower with bank(s) having 10% or more of the aggregate exposure of the banking system to that borrower. 10. Whether banks with less than 10 per cent of the aggregate exposure of the banking system to a borrower can offer only working capital demand loan (WCDL) / working capital term loan (WCTL) facility to the borrower or existing CC/OD facility can be enhanced. Banks are free to enhance existing CC/OD/WCTL/WCDL facilities or sanction new facilities in these forms subject to provisions of the circular on 'Guidelines on Loan System for Delivery of Bank Credit' dated December 5, 2018 as well as the ....
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....agreed between the bank and the borrower. Whether multiple escrow accounts can be opened for large corporates with multiple business units (BU) / multiple projects. For borrowers with multiple projects/ multiple business units, banks may open multiple escrow accounts for monitoring of project-wise / unit-wise cash flows. Banks opening project specific current/escrow account shall ensure that cash flows coming in the account are from that project/unit only. 14. Whether all lending banks are required to be part of the same escrow agreement? Whether non-lending banks can open such escrow accounts as mandated under para 1 (v) of the circular. Who will decide as to which bank will act as escrow agent? All lending banks should be part of....